- Swiss central bank unexpectedly raises interest rates.
- Swiss franc leads among currencies on Thursday after SNB surprise.
- The dollar loses strength at the opening of the American session.
USD/CHF extended the decline and hit 0.9719, the lowest level in a week. The Swiss franc is the best performing currency on Thursday buoyed by the Swiss National Bank (SNB) rate hike.
The dollar lost ground after the start of the American session. DXY turned negative even as Treasury yields remain near recent highs and risk aversion.
SNB kicks the board and Frank surges
The central bank of switzerland surprised on Thursday by raising the benchmark interest rate by 50 basis points to -0.25%. It was an unexpected move and the primary rose in 15 years on a worsening inflation outlook. In Swiss inflation shows an upward trend but far from the levels of the US or the Eurozone. The president of the SNB did not rule out more increases.
Regarding the exchange rate, the SNB no longer spoke of an “overvalued” franc. Jordan said that they could intervene in the market in any direction.
SNB shares triggered a strong rally in the franc which is still going on. USD/CHF is closing in on 0.9700 and is already down 300 pips from Wednesday’s high. This sharp reversal comes after the pair was unable to break above 1.0050, nor hold above the parity level, as it did four weeks ago.
The USD/CHF pullback has supports ahead at 0.9660 then 0.9600 followed by 0.9545 (May low). To the upside, the dollar is facing resistance at 0.9800 and then at 0.9870. Just above 0.9950 the dominant tone would become bullish. EUR/CHF moved from 1.0400 to 1.0127 on Thursday, hitting a two-month low.
Technical levels
Source: Fx Street
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